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Supreme Court Rules Overseas Wrong-doings Ineligible for Suit in U.S.

On December 1, 2015, the United States Supreme Court ruled that a California resident who had been injured in an accident in Austria could not bring suit against the Austrian state-run railroad in a United States court. In so doing, the court issued yet another ruling that limited access to the U.S. courts to redress wrong-doing that occurred entirely overseas.

In OBB Personenverkehr AG v. Sachs, the plaintiff, Ms. Sachs had purchased a Eurail pass from a Massachusetts-based internet site, which allowed her access to OBB and several other European railroads. While using the pass to travel on OBB, Ms. Sach suffered horrific injuries when she slipped on an OBB platform and was run over by a train. Ms. Sachs brought a lawsuit in California federal court seeking redress for her injuries and asserting various claims, including negligence, strict liability, and failure of OBB to warn of a potentially dangerous condition that existed on the platform. OBB in turn sought dismissal of the case under the Foreign Sovereign Immunities Act, 28 U.S.C. Sec. 1605 (FSIA), the federal statute that grants immunity to foreign sovereigns from lawsuits in the United States. A notable exception to the immunity granted by the FSIA is for claims "based upon a commercial activity carried on in the United States by [a] foreign state." Ms. Sachs claimed that her lawsuit was "based upon" the purchase of her Eurail ticket in the United States and that, as a result, the immunity of the FSIA did not apply.

Ms. Sachs' lawsuit was dismissed by the lower court, and that dismissal was affirmed by the Ninth Circuit Court of Appeals. However, an en banc panel of that court reversed and reinstated the lawsuit.

U.S. Supreme Court Reverses Ninth Circuit

In its decision last week, a unanimous Supreme Court focused on the "based upon" language of the FSIA and reversed the Ninth Circuit. The court reasoned that an action is "based upon" the particular conduct that is the "gravamen" of the suit. Put differently, a lawsuit is based upon the group of facts most essential to the underlying claims. Having so determined, the court held that the conduct relevant to Ms. Sachs' suit, the "gravamen," clearly occurred abroad. All of Mr. Sachs' claims turned on conduct that took place in Austria, including the allegedly dangerous condition of the platform and any wrongful conduct by the railroad that led to her injuries.

The court's ruling rejected the broad interpretation of the "commercial activity" exception to FSIA that had been advocated by Ms. Sachs, an interpretation that could have expanded the exception significantly and opened the door to a number of additional lawsuits against foreign sovereigns in U.S. courts, even where such suits were based principally on activity that occurred abroad. Of even greater significance, however, the court's ruling followed a recent line of cases that likewise placed limitations on the ability of parties to sue in U.S. courts to redress wrong-doing that occurred entirely abroad. These included Kiobel v. Royal Dutch Petroleum, which addressed the Alien Tort Statute; Morrison v. National Australia Bank, which limited the extraterritorial application of certain U.S. statutes, and Daimler AG v. Bauman, which limited the assertion of personal jurisdiction on foreign companies through their U.S. subsidiaries.

These cases, each of which was decided without a dissent, along with OBB suggest great reluctance on the part of the Supreme Court to increase access to U.S. courts and U.S. law to redress such largely overseas conduct, which in turn would appear to be a significant boost for principles of comity. They also suggests a recognition that the U.S. courts have a limited role in policing conduct that takes place abroad and that tenuous connections to the U.S. should not serve as a basis for expanding that role.

Compare jurisdictions: Arbitration

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